When the Current Population Survey (CPS) was introduced in 1940, it was based on a
survey of approximately 8,000 households. The CPS survey is now based on a survey
of how many households?
A) 8,000
B) 10,000
C) 12,000
D) 20,000
E) 60,000
When a government reduces its deficits by increasing taxes, in the medium run,
A) output returns to potential.
B) output increases.
C) interest rate is higher.
D) IS curve shifts inward to the left.
Suppose individuals now believe that there will be a future tax cut. This reduction in
expected future taxes will cause which of the following to occur in the current period?
A) the LM curve to shift down
B) the LM curve to shift up
C) the IS curve to shift rightward
D) the IS curve to shift leftward
E) none of the above
Which of the following factors is not believed to affect output in the long run?
A) technology
B) monetary policy
C) the size of the labor force
D) the capital stock
By 2011, which of the following countries had the highest level of real output per
capita?
A) United States
B) France
C) Japan
D) United Kingdom
When the unemployment rate is low, we would expect that
A) the probability of losing a job is high.
B) the probability of losing a job is low.
C) the probability an unemployed individual will find another job is low.
D) the separation rate will increase.
A core belief of modern macroeconomics is that in the long run,
A) a change in money growth will affect the level of output, but not its composition.
B) a change in money growth will affect the composition of output, but not its level.
C) output can deviate permanently from its natural level.
D) a change in fiscal policy will not affect the composition of output.
E) greater saving will result in greater output.
For this question, assume that equilibrium output is determined in the ZZ-Y diagram.
Further assume that policy makers’ goals are 1. to achieve balanced trade (i.e., NX = 0);
and 2. to achieve a target level of output, say YT. Now, suppose that the initial level of
equilibrium output is equal to YT (i.e., Y = YT) and that a trade deficit exists at this
initial level of output. Which of the following policy actions would most likely enable
the policy makers to achieve their two goals simultaneously?
A) a reduction in government spending
B) convince the country’s trading partners to pursue policies that will cause an increase
in foreign income (Y*)
C) a reduction in the real exchange rate
D) a reduction in taxes
E) a simultaneous increase in government spending and reduction in the real exchange
rate
F) none of the above
In late 2007 and early 2008, the U.S. Federal Reserve pursued expansionary monetary
policy. Which of the following will occur as a result of this monetary policy action?
A) The LM curve shifts down.
B) The LM curve shifts up.
C) The IS curve shifts rightward as the interest rate falls.
D) The IS curve shifts leftward as the interest rate increases.
E) none of the above
The FDIC currently insures each bank account up to what level?
A) $10,000
B) $50,000
C) $250,000
D) $150,000
The data for the U.S. show that investment and profits
A) have a strong negative relationship.
B) are positively related during recessions, and negatively related during expansions.
C) move independently.
D) are positively related during expansions, and negatively related during recessions.
E) none of the above
A reduction in the real exchange rate indicates that
A) foreign goods are now relatively cheaper.
B) foreign goods are now relatively more expensive.
C) domestic goods are now relatively more expensive.
D) both A and C
If government spending and taxes decrease by the same amount,
A) the IS curve does not shift.
B) the IS curve shift leftward.
C) the IS curve shifts rightward.
D) the LM curve shifts downward.
Research indicates that the more independent the central bank,
A) the smaller the budget deficit.
B) the higher the nominal interest rate.
C) the lower the rate of inflation.
D) the larger the time inconsistency problem in making policy.
E) the greater the likelihood of a “war of attrition” over policy.
Which of the following will tend to occur as a result of a reduction in the proportion of
a country’s workers who have indexed wages?
A) the unemployment rate will be relatively low.
B) the unemployment rate will be relatively high.
C) the inflation rate will be relatively low.
D) a given change in the unemployment rate will cause a relatively smaller change in
the inflation rate.
E) none of the above
In the production function Y = f(K, NA), for a given state of technology, constant
returns to scale implies that output (Y) will increase by 7% when
A) K or NA increase by 7%.
B) K and N increase by 7%.
C) N or A increase by 7%.
D) N and A increase by 7%.
E) all of the above
A change in which of the following variables will have no direct effect on the level of
domestic demand?
A) domestic income
B) the real exchange rate
C) government spending
D) the interest rate (r)
E) none of the above
Suppose the central bank implements a monetary expansion that is not fully anticipated
by financial markets. Given this information, we would expect
A) stock prices to rise.
B) stock prices to fall.
C) stock prices to remain unchanged.
D) an ambiguous effect on stock prices.
E) none of the above
Which of the following statements about Fed management of the money supply is
correct?
A) Over the past thirty years, the Fed has always stayed within its pre-announced target
rates for growth in M2.
B) The most common tool used by the Fed is a change in the required ratio of reserves
to deposits.
C) The rate at which the Fed lends money to banks is called the “Federal Funds rate.”
D) The Fed must report each week to Congress on the conduct of monetary policy.
E) none of the above
For this question, assume the interest parity conditions holds. Also assume that the
domestic interest rate is 10% and that the foreign interest rate is 7%. Given this
information, we would expect that
A) individuals will only hold foreign bonds.
B) individuals will only hold domestic bonds.
C) the domestic currency is expected to appreciate by 3%.
D) the domestic currency is expected to depreciate by 3%.
A large “T-statistic” tell us that
A) a tiny change in the independent variable will cause a relatively large change in the
dependent variable.
B) we do not have enough data to obtain an accurate regression line.
C) we can be confident that our estimated coefficient is not zero.
D) we should have included more “lags” in our model.
E) we have incorrectly switched the dependent and independent variables in our model.
Work by Doug Diamond and Philip Dybvig in the 1980s had clarified the nature of
A) unemployment.
B) bank runs.
C) inflation.
D) growth.
What is the major reason for oil price to go up in the 1970s?
A) formation of the OPEC
B) fast of growth of emerging economies
C) new energy
D) higher demand from the US
The method of constructing a measure of technological progress relies on which of the
following assumptions?
A) each factor of production is paid its marginal product
B) population growth does not change
C) population growth is zero
D) the saving rate does note change
In 2014, which of the following countries had the highest ratio of exports to GDP?
A) United States
B) Germany
C) Japan
D) Netherlands
Which of the following is an exogenous variable in our model of the goods market in
Chapter 3?
A) consumption (C)
B) saving (S)
C) disposable income (YD)
D) government spending (G)
E) none of the above
Which of the following is not true about technological progress?
A) allow for the production of a larger quantity of goods using the same number of
workers
B) lead to the production of new goods
C) lead to the disappearance of old goods
D) cause a reduction in employment in the short run
E) none of the above
Which of the following statements is always true?
A) Investment equals depreciation.
B) Investment equals the capital stock minus depreciation.
C) The capital stock is equal to investment minus depreciation.
D) Any change in the capital stock is equal to investment minus depreciation.
E) The increase in investment is equal to the capital stock minus depreciation.
An increase in income will cause
A) a reduction in the supply of central bank money.
B) a reduction in the demand for currency.
C) a reduction in the demand for reserves.
D) none of the above
E) both B and C
Estimates are that tradable goods in the U.S. account for approximately what share of
GDP in the U.S.?
A) 10%
B) 16%
C) 25%
D) none of the above